A Revocable Living Trust is one of the most powerful tools in estate planning. It’s “revocable,” meaning you can “revoke” it. It helps you stay in control of your assets while you’re alive, plan for incapacity, and avoid probate when you die. It has many benefits, but … many people make costly mistakes when setting one up—or after it’s created. I have seen this again and again and again.
Here are the seven most common mistakes to avoid if you to do a revocable living trust correctly:
1. Not Funding the Trust
This is #1 for a reason. It is hands-down the most common (and most serious) mistake. Creating a trust is just the first step. If you don’t transfer your assets into the trust, it’s like buying a safe and leaving your valuables on the kitchen counter.
What to do instead: Re-title your accounts and real estate into the name of the trust. For certain assets like retirement accounts, name the trust as a beneficiary if appropriate. Make sure nothing is left out unintentionally.
2. Not Naming a Backup Trustee
The trustee manages your assets during your life (if you’re incapacitated) and after your death. Picking someone who’s not trustworthy, organized, or capable can cause real problems.
What to do instead: Choose a responsible, detail-oriented person or professional trustee. Always name at least one successor trustee in case your first choice can’t serve.
3. Thinking a Trust Avoids All Taxes
Some people mistakenly believe that a revocable living trust helps them avoid estate or income taxes. In reality, a revocable trust does not provide tax sheltering—at least not on its own.
What to do instead: Speak with your CPA/tax advisor or attorney about additional estate tax planning tools if your estate is large enough to trigger estate tax. Get your CPA and attorney to work together.
4. Not Updating the Trust After Life Changes
Life changes—divorce, remarriage, the birth of a child, buying a new home. If your trust doesn’t reflect those changes, your plan may be out of date when it matters most.
What to do instead: Review your trust every few years, and definitely after major life events. Update it to reflect your current wishes and circumstances.
5. Overcomplicating (or Oversimplifying) the Distribution Plan
Some people create overly complex plans that are hard to administer, while others make it too simple—like giving everything to a young adult child in a lump sum.
What to do instead: Balance flexibility with protection. Consider whether beneficiaries would benefit from staggered distributions, asset protection, or incentives.
6. Failing to Coordinate With Other Estate Planning Documents
A trust doesn’t replace everything. You still need a will (often called a “pour-over will”), powers of attorney, and healthcare directives. These documents work together with your trust to create a complete plan.
What to do instead: Make sure all of your estate planning documents are aligned and up to date.
7. Keeping the Plan a Secret
Some people never tell their family or successor trustee about the trust, which can lead to confusion and delays.
What to do instead: Let your loved ones and trustee know where the documents are, what their roles are, and how to access help if needed. You don’t have to disclose every detail—but transparency avoids surprises.
Last Thoughts
A revocable living trust can give you peace of mind and protect your loved ones—but only if it’s set up and maintained correctly. By avoiding these common mistakes, you can ensure your trust does what it’s designed to do: make life easier for you and your family during life, disability, and after death.
Based on an article by Paul Rabelais.
Scott L. Smith, Jr. - Estate Planning Attorney 